The Truth about Trade

Dean is Chairman Emeritus of 'Truth About Trade & Technology, a nonprofit advocacy group led by a volunteer board of American farmers.

Bad Policy Can Create An Unnatural Agriculture Disaster

Nov 07, 2013

By David Hughes: Buenos Aires, Argentina

My home of Argentina is one of the world’s great breadbaskets. This nation of around 40 million people can feed more than 400 million, making farmers like me essential to global food security.

Unfortunately, the current government’s policy of export taxes and quotas threatens our ability to produce food. To make matters worse, the government provides powerful incentives to pursue short-term gains at the price of long-term productivity and ultimately, soil health.

To remain an agricultural dynamo, Argentina must reverse course immediately.

My partners and I manage more than 6,000 hectares near the capital city of Buenos Aires. We grow corn, soybeans, wheat, and barley. As with most Argentine farmers, our livelihood depends on our ability to sell goods to people in other countries.

Five years ago, however, the government placed huge export taxes on several important crops, in an ill-advised attempt to cheapen prices at home. If we want to sell soybeans outside our borders, we have to pay a special tax of 35 percent. The export tax on corn is 20 percent and on wheat it’s 23 percent. Many other items also face export taxes: beef, milk, flour, soybean oil, and more.

To complicate matters even more, the government imposes export quotas on corn and wheat. So even if we’re willing to pay the big export taxes as a cost of doing business, we can’t always sell as much as we’d like. When the export quotas fill up, crop prices in the domestic market collapse. Argentine farmers sometimes receive only half the income American farmers would expect from the same harvest.

This one-two punch of export taxes and quotas wildly distorts market signals, pressuring farmers to make decisions that have nothing to do with economic common sense or environmental sustainability.

One result of the government’s attempt to control agricultural markets is that farmers are planting a lot more soybeans—a staple crop that faces hefty export taxes but not quotas. Over the last decade, soybean acreage has increased by 50 percent.

Soybeans are of course a perfectly good plant to grow, but they are best raised in turn with other crops, especially corn. The soybean-corn rotation is one of the most common in the world, for the simple reason that this cycle improves soil nutrients and moisture.

It’s just a good, sustainable farming practice.

Yet the government’s interference throws this beneficial system out of balance—and farmers face strong economic incentives to pursue goals that will reduce our ability to grow food in the future.

If farmers plant soybeans in the same field, season after season, they risk harming the soil. Without corn stalks as a protective cover, the runoff from rainwater can lead to significant soil erosion. This robs future crops of important nutrients and makes them more vulnerable to drought.

A recent article by Reuters reporter Hugh Bronstein made the point clearly: "The loss of fertility is a slow-burning threat to crop yields," he wrote. "On the Pampas farm belt, the trend toward soy at the expense of corn could rob Argentina of its natural advantage as an agricultural powerhouse in the decades ahead."

This endangers Argentine farmers directly, but we aren’t the only ones who should worry. Demographers say that to keep up with population growth, the world must double its food production by 2050.

If we’re to meet this goal, Argentina must be a part of the equation.

But that solution is at risk—not because of a natural disaster such as a long dry spell, but because of the unnatural disaster of bad policy.

Half of the farmland in Argentina is leased, which means many farmers are especially susceptible to the government’s incentives to think about getting the most out of today and not to worry about tomorrow. Too many are stretching the health of their soil, living off the previous management.

The government needs to abandon its harmful policies and make it economically feasible for farmers to pursue proper crop rotation. The alternative is an agricultural disaster.

The stakes are high. We need to get it right, for the sake of both my country and the world’s food security.

David Hughes and his partners grow corn, soybeans, wheat and barley in Buenos Aires province and are developing a cattle ranch in Sla Rioja province, Argentina. David is a member of the Truth About Trade & Technology Global Farmer Network (www.truthabouttrade.org). Follow us: @TruthAboutTrade on Twitter| Truth About Trade & Technology on Facebook.